Adjusted trading profits

Question 1

What are adjusted trading profits?

Answer 1

Nett profit +/- adjustments.

Question 2

What is disallowable expenditure?

Answer 2

Expenditure not acceptable for corporation tax.

Question 3

What is the rule for disallowable expenditure?

Answer 3

All allowable expenditure must be wholly and exclusively for the purpose of trade.

Question 4

Are FINES allowable?

Answer 4

Fines on the business are disallowable, must operate within the law. parking fines on employees are allowable (NOT Directors).

Question 5

Is FRAUD allowable?

Answer 5

Fraud is disallowable asit does not relate to company trading activities. Petty theft carried uot by employyes is allowable.

Question 6

Are DONATIONS allowable?

Answer 6

Carities are disallowable for National and Political parties, local charities allowable. Charity donations are deuctible in working out total taxable profits.

Question 7

Is CAPEX allowable?

Answer 7

Capital charged to P&L (Depreciation, small capital items) are disallowable. Repair or Improvement?

Question 8

Are CAPEX legal expenes allowable?

Answer 8

Acquiring Capital item disallowable. Purchase of lease disallowable. Collection of trade receivables, employee issues (allowable). Renewing a short lease (Allowable). Dispute over land boundaries (allowable).

Question 9

Are IRRECOVERABLE DEBTS allowable?

Answer 9

Ant debts relating to trade are allowable. Write off of a non-trade debt is disallowable (e.g. employee loan).

Question 10

Is INTEREST PAYABLE allowable?

Answer 10

Interest payable on trading loans are allowable, interest on non-trading loans must be disallowed and applied to non-trade related interest income.

Question 11

Is ENTERTAINING allowable?

Answer 11

Entertaining customers and suppliers is disallowed. Cost of entertaing staff is allowable.

Question 12

Are GIFTS allowable?

Answer 12

Gifts to employees are allowable. All other gifts must meet certain criteria to be allowed. 1.) Must incorporate an advertisement. 2.) must be no more than £50. 3.) Must not contain alcohol, food, tobacco or voucher.

Question 13

Are HIRE OR LEASE CHARGES allowable?

Answer 13

130g/km 15% of the lease charge.

Question 14

Are DIVIDENDS allowable?

Answer 14

Dividends are not allowable however they are calulated in the P&L after the Nett Profit therefore not included in expenses.

Question 15

What kind of incomes in the P&L are not taxable?

Answer 15

Rental income, interest receivable, Dividends received, Profits on sales of NCA. Must be deducted from profits.